Private surveys indicate that U.S. winter wheat 2013 planted acres may be higher than for the 2012 crop. Increased planted acres are expected to have little impact on wheat prices until January or February. And if the drought is not broken, increased planted acres may have little, if any, price impact.
Hard red winter (HRW) wheat planted acres are expected to be about the same as the 2012 HRW wheat crop. Soft red winter (SRW) and hard spring (HS) wheat planted acres are expected to increase. Higher SRW wheat acres will have minimal impact on HRW wheat prices and the price impact of increased hard spring wheat acres would not occur until July or August 2013.
The factors that may have the largest price impact are Russian, Ukraine, and Kazakhstan wheat exports, Australian wheat production, and U.S. winter wheat planting conditions. Many analysts predict that Russia and Ukraine will have sold their supply of exportable wheat by late October.
Australia’s wheat production is highly variable. The five-year (2006 – 2011) average wheat production, using USDA estimates, is 839 million bushels. ABARES’ (Australian Bureau of Agricultural and Resource Economics and Sciences) five-year average wheat production estimate is 836 million bushels. The USDA has Australia’s wheat production at 499 million bushels in 2006; 787 million bushels in 2007; 802 million bushels in 2008; 1025 million bushels in 2010; and 1083 million bushels in 2011.
The USDA projects Australia’s 2012 wheat production to be 955 million bushels compared to ABARES’ 2012 estimate of 828 million bushels. USDA’s projection is well above the average and ABARES’s projection is near the five-year average. The point is that Australia’s 2012 wheat production will probably be an average wheat crop and that the production may be 250 million bushels (24 percent) less than 2011 wheat production.
Argentina’s 2012 wheat production is projected to be 423 million bushels compared to 551 million bushels in 2011 and a five-year average of 467 million bushels. Even though Argentina’s wheat production is projected to be 84 million bushels (15 percent) less than last year, analysts appear to not have given it much attention. Argentina’s below average wheat production may have as big a price impact as Australia’s average production.
Both world and U.S. wheat ending stocks are projected to be slightly below average. The stocks-to-use (ending stocks divided by annual use) ratios are a higher percentage below average than the ending stocks estimates. World and U.S. wheat stocks have declined from abundant in June and July to relatively tight now.
All of the above makes the drought situation, winter wheat planting conditions, and additional planted acres more important price-wise. If the 2013 U.S. winter wheat crop does not get established and/or if the acres do not get planted, wheat prices should react relatively soon. However, if the winter wheat crop gets established, the price impact should not happen until next spring.
About July 16, the Kansas City Board of Trade December wheat contract started a sidewise price pattern between $8.69 and $9.57. The price has challenged the $9.57 resistance level three times and the $8.69 support price three times. Since August 16, the December wheat contract price has not traded below $8.86.
About the only thing that could cause the KCBT December wheat contract price to break the $8.86 support price is if Australian or Argentine wheat production is above average. It may be November before a solid Australian and/or Argentine wheat product estimate is available.